Prepaid foreign debts fall 33% in first 9 mths

THE amount of foreign debts being settled before maturity has dropped year-on-year by double-digit in the first nine months of the year, Bangko Sentral ng Pilipinas (BSP) data showed.

Debt prepayments on medium- and long-term foreign loans fell by 33 percent to $1.561 billion in the first nine months of 2016, compared with $2.342 billion in January to September 2015.

BSP Deputy Governor Diwa Guinigundo explained that prepayments are normally limited to the amount of loans that have prepayment clauses in their contracts.

“Actual cash position of corporates is also another key consideration,” he said in a text message to reporters on Tuesday.

Exchange rate movements also figure prominently in the decision by companies to prepay debts.

The BSP data covers foreign-denominated debts payable in at least five years and settled ahead of schedule.
Prepayment makes debts more manageable. Doing so for foreign loans, the central bank said, would be a prudent exercise when the local currency showed strength.

The public sector—which includes the national and local governments as well as state-owned- and -controlled corporations—accounted for the bulk of total prepayments in the first three quarters of 2016.

These payments totaled $1.132 billion for the period, which was 22 percent higher than the amount of $1.466 billion prepayments recorded a year earlier.

Private corporations prepaid a total of $429 million, down 50 percent from $875 million in the same comparable period.